NFP directors focused on culture; split on approach to innovation and cybersecurity

Tuesday, 31 July 2018

A new report released today by the Australian Institute of Company Directors (AICD) shows that directors of not-for-profits are dedicating more time in their governance roles, as new challenges and opportunities face the sector.

Now in its ninth year, AICD’s NFP Governance and Performance Study is the largest survey of its kind in Australia, with 2022 respondents and national focus groups across the country.

Survey participants included directors and executives from a diverse list of NFP organisations in every state and territory, with revenue ranging from $100,000 to $50 million.

This year’s study explored current and emerging issues facing the sector including cybersecurity, innovation, financial viability and culture.

AICD Managing Director & CEO Angus Armour said that the report revealed that governance was improving across the NFP sector with 82% of directors rating the quality of governance as either somewhat or much better than three years ago.

“There’s no doubt that directors have responded to the need to enhance governance in the sector given the critical role these organisations play in our community,” he said.

The Study did however highlight that greater clarity was needed about the critical role boards play in driving innovation to protect the organisation from emerging threats.

“The pressure to innovate is reflected in this Study, with 45% of respondents agreeing their NFP did not allocate sufficient resources to innovation and 44% saying their NFP was less innovative than needed,” he said.

“However it’s interesting that directors appear split on the board’s role in innovation, with roughly half seeing it as the role of the CEO, while others see the board as driving innovation via the strategic plan or by generating ideas for management.

“Not all boards may see themselves as innovators, but given the growing awareness of the board’s role in setting culture, the board must play a role in facilitating innovation within a business.”

The Study also found that more than half of NFP directors reported that cybersecurity is either an operational issue or not considered regular board business.

“It may be there is a need for NFP directors to improve their capability around technology as boards of any type of organisation cannot ignore cybersecurity risks. This is certainly an area that the AICD is and will remain focused on,” said Mr Armour.

In 2018, 75% of respondents reported that their culture was monitored well, up from 43% last year. When focusing on NFPs with more than 100 employees that number rose again to 97%. “NFP directors have seen declining levels of trust in society, and in NFPs, and are pursuing improved workplace cultures as one measure to address this,” Mr Armour said.

“It’s clear that despite the challenges in measuring culture, directors are focused on establishing and maintaining a culture aligned to their mission and stakeholder expectations.

“This year’s findings show that the directors of NFPs are engaged, committed, and have strong foundations in place to meet the governance demands and expectations ahead.”

The 2018 NFP Governance and Performance Study also put the spotlight on aged care organistions, and revealed impending consolidation across the sector.

The Study found that mergers are an increasing topic among aged care providers, with 36% of directors saying the issue had been discussed, and 12% having either completed or about to complete a merger in the next 12 months. Asked about the likelihood of a merger in the next two years, 40% said there was a 50% or greater chance.

“While funding, and certainty of funding, remains a challenge for aged care organisations, Australia’s ageing population means the sector will face increased demands on its resources and abilities,” said Mr Armour.

“Directors in the sector are concerned not only about financial sustainability, but how they respond to the need for increased infrastructure and what their future workforce will need to look like.”

Key findings of the 2018 NFP Governance and Performance Study:

  • 82% of respondents undertake their NFP governance role for no financial reward.
  • 58% said they were working more than 2 days per month on their NFP, compared to 41% in 2013.
  • Half of respondents believe innovation is the responsibility of management and half view it as a board role.
  • 75% of respondents are actively engaged in monitoring, measuring and leading culture this year – a significant increase on 2017.
  • Boards are using a combination of methods to measure culture, with staff survey results, staff turnover and dismissals, client survey results, OH&S reports and client complaints all rating as common methods.
  • 25% of respondents believe their boards need to perform better.
  • 38% reported their board had a ‘very good’ understanding of the impact of a cyberattack on service users and 25% of the probability of a cyberattack on their organisation.

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